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Tuesday, November 29, 2016

Emerging Powers and New Development Institutions: the NDB and the AIIB

Over the past fifteen years, the field of international development has undergone tectonic shifts. While traditional multilateral financial institutions like World Bank are not the only actors that provide development assistance, emerging economies are playing an increasingly significant role in promoting south-south development cooperation. As prominent achievement of the cooperation, New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB) have attracted much attention since their foundation. Multiple problems about the two banks, however, including their institutional innovation in comparison with traditional financial institutions and the direction of their projects, still remain to be explored.

A workshop titled as “Emerging powers and new development institutions: the NDB and the AIIB” was jointly held by Global Studies Institute, University of Geneva and the Center for BRICS Studies, Fudan University on November 24-25, 2016 in Geneva. Over 20 scholars from BRICS countries and Switzerland discussed the problems of innovation and institutionalization of the two development banks on this workshop.

Whether the two institutions have disparities on institutional settlement with traditional multilateral development banks like World Banks is one of core issues on which participants showed lots of interests. Dr. Omar Serrano from University of Geneva pointed out new multilateral financial institutions are being innovative by looking at three aspects, including institutional design, personnel recruitment and lending practices, and the decision to challenge existing institutions by individual emerging powers is dependent on their interests, status, power and regulatory capacity. Commenters thought that the three aspects to estimate institutional innovation can be further optimized to provide a better perspective for analyzing institutional innovation of NDB. Dr. Wang Lei from University of Lucerne made a comparison for various multiple development banks including World Bank, European Investment Bank, Asian Development Bank, Islamic Development Bank, NDB, AIIB and so on from a series of aspects like openness, priority of projects, funding resource, governance structure and de facto veto power, concluding that in terms of institutional design, NDB and AIIB are followers of traditional multilateral development banks and NDB is only unique in its equal sharing among five founding members, but whether this unique characteristic will be kept remains to be observed. Prof. Diana Barrowclough from University of Geneva analyzed the reasons of south-south financial cooperation and pointed out that emerging multilateral financial institutions like NDB show differences from traditional ones in equal power between shareholders, leaner structure, no conditionality, bigger focus on productive integration and regional integration projects and so on. Prof. Zhu Jiejin from the Center for BRICS Studies, Fudan University elaborated the complementary regime competition between New Development Bank and World Bank, stating that the two institutions share similarity on basic principles and norms of international development, meanwhile New Development Bank is challenging the World Bank through a series of institutional innovations in its structure, norms and procedures, which are also urging internal reform of World Bank. Prof. Feliciano de Sà Guimarães from University of São Paulo who is also interested in multilateral regime competition analyzed the theory that unsatisfied rising powers are able to create new institutions, and the new institutional making can improve regime complexion.

Moreover, some other subjects about emerging multilateral financial institutions were also discussed in this workshop. Michelle Gysin, alternative executive director of AIIB in Switzerland, briefly introduced Swiss participation in multilateral development banks, analyzed the reasons why Switzerland joined in AIIB, which included infrastructure needs, change of international landscape and integration of China, and Swiss priorities at AIIB, such as application of high standards, focus on Asia, green development and so on. And Michelle Gysin also pointed out that as a small country, Switzerland expects to join in rule shaping through participating in multilateral development banks, and the country is try to maintain a balance between developing bilateral economic cooperation and joining in multilateral financial governance. Prof. Zheng Yu from the Center for BRICS Studies, Fudan University discussed the role of middle income countries in international development. According to Prof. Zheng Yu, while middle income countries are playing an increasingly important role in international development cooperation, the rising inequality among developing countries will change the dynamics of global development and poverty reduction, and with the rising presence of emerging donors, tied aid as one of the most controversial assistance approaches may gain more prominence rather than fade away. Maiara Folly from Brazil’s Instituto Igarapé said that through cross-border infrastructure investment, New Development Bank can boost sustainable development and regional integration in South America. In terms of this view, some scholars pointed out that analysis about why South American countries should select New Development Bank rather than other multilateral development banks is a necessity, and China’s projects like One Belt One Road, NDB and AIIB have different targets and roles on regional integration, which is a problem remaining to be further explored in the future.